Economists define risk as: the chance that the value of financial assets will change from what you expect the difference between the interest rate borrowers pay and the interest rate lenders receive the ease with which an asset can be exchanged for other assets or for goods and services the difference between the return on common stock and the return on corporate bonds
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Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment's risk, the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk-averse; investors dislike risk and require rates of return as an inducement to buy riskier securities. A represents the additional compensation investors require for bearing risk; it is the difference between the expected rate of return on a given risky asset and that on a less risky asset. An asset's risk can be considered in two ways: on a stand-alone basis and in a portfolio context.
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Define return and risk. Discuss the trade-off between them.
WHAT IS Risk ?
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